Anderson v AON Risk Services Australia Ltd & Anor [2004] QSC 180

SUPREME COURT OF QUEENSLAND CITATION: Anderson v AON Risk Services Australia Ltd & Anor [2004] QSC 180 PARTIES: MALCOLM ANDERSON (plaintiff/respondent) v AON RISK SERVICES AUSTRALIA LIMITED ACN 000 434 720 (first defendant/applicant) HISCOX DEDICATED CORPORATE MEMBER LTD (second defendant/applicant) FILE NO/S: S 2097/00 DIVISION: Trial Division PROCEEDING: Written Submissions ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 18 June 2004 DELIVERED AT: Brisbane HEARING DATE: Written Submissions JUDGE: McMurdo J ORDER: 1. That the plaintiff pay the first defendant its costs of the proceeding to be assessed on a standard basis 2. That the plaintiff pay the second defendant its costs of the proceeding, assessed on a standard basis to 24 December 2003 and assessed thereafter on the indemnity basis CATCHWORDS: PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – ORDER FOR COSTS ON INDEMNITY BASIS – whether the institution and prosecution of the claim was unreasonable in the circumstance – whether discretion should be exercised to award costs on indemnity basis PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – ORDER FOR COSTS ON INDEMNITY BASIS – where offers to settle were made under the UCPR – where offers rejected – whether rejection of each offer was unreasonable in the circumstances – whether costs should be awarded on indemnity basis Trade Practices Act 1974 (Cth), s 82 -- 1 of 4 -- 2 Uniform Civil Procedure Rules 1999, r 361, r 704 Colgate-Palmolive Co & Anor v Cussons Pty Ltd (1993) 46 FCR 225, cited Di Carlo v Dubois & Ors [2002] QCA 225, cited Emanuel Management Pty Ltd (in liquidation) & Ors v Foster’s Brewing Group Ltd & Ors and Coopers & Lybrand & Ors [2003] QSC 299, distinguished COUNSEL: B D Chappell (sol) for the plaintiff/respondent N Pearce (sol) for the first defendant/applicant P E Baxter (sol) for the second defendant/applicant SOLICITORS: LyonSmith Commercial Lawyers for the plaintiff/respondent Sparke Helmore Solicitors for the first defendant/applicant Phillips Fox Lawyers for the second defendant/applicant [1] McMURDO J: On the commencement of the trial of these proceedings, I gave the plaintiff leave to discontinue against the first defendant with costs reserved. The trial proceeded as a claim against the second defendant, for whom I gave judgment against the plaintiff. When I gave judgment, the parties asked for some time to prepare written submissions as to costs, which I subsequently received. [2] Each defendant seeks costs from the plaintiff on an indemnity basis. The plaintiff concedes that he should pay their costs, but on a standard basis. The power to order that costs be assessed on the indemnity basis comes from r 704 of the Uniform Civil Procedure Rules 1999. The discretion is a broad one, but clearly there must be something about the facts and circumstances beyond the demerit of a party’s case, as reflected in the outcome, before such an order is warranted. Examples of cases where it is appropriate to order indemnity costs were given by Sheppard J in Colgate-Palmolive Co & Anor v Cussons Pty Ltd (1993) 46 FCR 225, in a judgment cited with approval by White J (Williams JA and Wilson J agreeing) in Di Carlo v Dubois & Ors [2002] QCA 225 at [37]. The first defendant’s costs [3] The first defendant submits that the case against it was “always doomed to failure”. That case depended upon the correctness of the contention by the second defendant that the policy insured for market value, and not for agreed value. That contention was abandoned by the second defendant only on the first day of the trial. In consequence of that abandonment, the plaintiff sought and was given leave to discontinue against the first defendant. But whilst the second defendant had persisted in that contention, there was some justification for the joinder of the first defendant, upon the basis that the first defendant had led the plaintiff to believe that his policy was or would be for agreed value. [4] It is further submitted that the plaintiff had no prospect of proving its damages, because it pleaded no case to the effect that it could have obtained insurance on an agreed value basis, had the alleged misrepresentations by the first defendant not been made. But it is far from clear that the plaintiff’s pleading was deficient in that respect. I agree that the proof of damage for the purpose of recovering damages -- 2 of 4 -- 3 under s 82 of the Trade Practices Act 1974 (Cth) would have required the plaintiff to establish the availability of other agreed value insurance, and which was procurable without misrepresentation by the insured. Had the trial between the plaintiff and the first defendant proceeded, the plaintiff might have been permitted to prove that case upon his statement of claim, or he may have been permitted to amend so as to prove that case. A loss of alternative insurance, or at least of the chance to obtain alternative insurance, is the kind of loss which the first defendant should have anticipated that the plaintiff would seek to prove. If the claim had been opposed on the argument that it was beyond the plaintiff’s pleaded case, an application to amend would have required me to assess the extent to which, if at all, the defendant would have been unfairly prejudiced by the amendment. The plaintiff might have been permitted to prove a loss of this kind upon his existing pleading, or upon an amended pleading. A reading of the statement of claim would not have compelled a conclusion that the case against the first defendant was bound to fail. [5] Thirdly, the first defendant submits that the plaintiff’s claim that the items had been stolen “was false to his knowledge”. In my reasons for judgment given on 19 March, I did not find that the plaintiff had fraudulently claimed that the items were stolen. My conclusion was that the plaintiff had failed to prove that they were stolen. I concluded that it was no more probable that they were stolen than that the plaintiff had made a false claim. Accordingly, this third submission does not provide a sufficient basis for awarding costs upon an indemnity basis. [6] I conclude that the circumstances of the plaintiff’s claim against the first defendant are not so special as to require costs to be assessed upon the indemnity basis. The second defendant’s costs [7] The second defendant relies upon what it says was the plaintiff’s unreasonable refusal of its offers to settle. There were three offers by the second defendant. The first was made on 24 December 1999, prior to the commencement of these proceedings. The second defendant then offered to pay $80,000 together with a pro rata refund of the insurance premium of $3,394.15. The evident basis for this offer was that the second defendant was willing to pay what it considered was the market value of the items and to refund that part of the premium which was attributable to the items which were over insured. I do not regard the rejection of that offer as so obviously unreasonable that the second defendant should have indemnity costs. As proceedings had not commenced, the defendant’s misrepresentation case had not been as clearly particularised as it was by the time of the second offer which was on 24 December 2003. The plaintiff might well have thought that the substance of the dispute was whether his insurance was upon an agreed value basis although misrepresentation had been suggested. In that context it was not unreasonable for the plaintiff to have refused this first offer. [8] The second offer made on 24 December 2003 was made after the misrepresentation case had been pleaded, and at a point relatively close to the trial so that the plaintiff and his advisors should have been in a position to see its strength. This was an offer made under the rules for the sum of $150,000 plus the plaintiff’s costs on a standard basis. As the second defendant now submits, on the most generous view of the valuation evidence, the total market value of the items insured was $114,420. Accordingly, had the plaintiff accepted this offer, he would have recovered what the allegedly missing items had been worth, together with some compensation for not -- 3 of 4 -- 4 being in receipt of those monies some years earlier. By refusing this offer, he was seeking to recover more from the insurer than the items had been worth, and in circumstances where he should have appreciated by then that he was likely to recover nothing. In my view, he should have by then appreciated that he had no reasonable prospect of doing better than this offer, and I conclude that his refusal of the offer was unreasonable. [9] The third offer, also made under the rules, was made on 23 January 2004. It offered $180,000 and costs on a standard basis. [10] Rule 361 provides for the case where an offer is made by a defendant which is refused and the plaintiff obtains a judgment but one which is not more favourable to the plaintiff than the offer. In that case, r 361(2) provides that the usual order would be that the defendant pays the plaintiff’s costs on the standard basis up to the service of the offer, and thereafter the plaintiff pays the defendant’s costs calculated on the standard basis. A case of the present kind, where the plaintiff refuses an offer but then recovers nothing, is not within r 361. In another case of this kind, Emanuel Management Pty Ltd (in liquidation) & Ors v Foster’s Brewing Group Ltd & Ors and Coopers & Lybrand & Ors [2003] QSC 299, Chesterman J said that where there are no countervailing circumstances an order for indemnity costs is likely to be made. As his Honour there pointed out, there is some debate in the authorities between two views: one that a defendant should have its costs absent some countervailing circumstances, and the other that the defendant must show that its offer was rejected unreasonably, judged in the circumstances known at the time it was made. I have concluded that each of the offers to settle made respectively in December 2003 and January 2004 was rejected unreasonably. And I see no countervailing circumstance in this case. But as Chesterman J said at [39] it is not sensible to adopt either position as a “rule” in the exercise of the Court’s discretion. As I see the present case, justice is best served by awarding the second defendant indemnity costs from the date of its service of its December offer, which was 24 December 2003. This was a policy which had issued in the context of misrepresentations by the plaintiff, as the plaintiff’s advisers are likely to have advised him had they been given accurate and complete instructions. It was not a case where some matter emerged in the course of the trial which substantially affected the apparent merit of the plaintiff’s claim. Further, it seems to me to be of some relevance that by rejecting this offer, the plaintiff was seeking to profit from the insurance, in the sense of ultimately obtaining more than the allegedly stolen items had been worth. [11] I therefore conclude that the plaintiff should pay the second defendant its costs to be assessed on the standard basis until 24 December 2003, and thereafter on the indemnity basis. -- 4 of 4 --